Tuesday, November 29, 2022

‘Capital market vital for govt’s economic diversification plans’ – BSE

Botswana Stock Exchange (BSE) says it is fitting into the government’s economic diversification plans by developing the capital market as the corner stone of change.

Chief Executive Officer, Hiran Mendis, in an interview with Sunday Standard pointed out that a country like Botswana where there are importing their savings, the capital market can have value created in Botswana from the savings being exported and add value locally.

Mendis observed that advantages for both Botswana and BSE are the favourable foreign investment climate with no exchange controls and competitive tax rate of 25 per cent. He also noted that Botswana has a stable political environment with multi party democracy and also bodes well for sustainability in investor confidence and foreign portfolio investment inflows.

“This country has an established track record of prudent economic management and exporter of savings but value could be created in Botswana prior to exporting. There is high GDP growth and low inflationary environment,” said Mendis.

He pointed out that BSE is benefiting on the highest credit rating in Africa (A2) and low levels of external debt as well as high potential for sustained issuances of government debt in Pula or other currencies. Mendis added that there is also potential catalyst for the development of capital markets.

“Listing is about synergy because it motivates change over the life cycle thus helping institution building and also helps build on advantages created by companies that have listed before,” he stated.

Mendis is of the sentiment that listing is about valuation and it becomes more important in the latter phases of the cycle when value shifts from internal to external factors. He added that it increases mobility of capital.

“A vibrant market has a domino effect on the economy. Disclosure of any price sensitive information that might materially impact the market,” said Mendis.

On the mortality rate, Mendis pointed out that 34 percent of small businesses are dissolved in the first two years while 60 percent of companies are liquidated within the first six years. He added that tolerance to a lack of change is mainly dependent on the business environment and also that a stable technological and market environment does not necessitate much change, a volatile environment does.

Mendis noted that business environment stability also depends on the degree of value addition on low value addition; environment is more stable and also higher value addition if environment is less stable.

“What we want as BSE are more companies to list equity and debt as more companies raise capital through IPO’s and Rights issues. We also want micro perspective – more listings, higher liquidity. Macro perspective act as a catalyst to realize investment and enhance growth,” he revealed.

BSE Market Development Manager, Lame Akanyang, echoed Mendis’s words that listing companies provide access to funding, improves the stature of the company and also provides creative ways of managing financial risk.

“BSE strategy is to attract SMMEs and entrepreneurs to the local exchange and we have conducted workshops, visited companies. When listing one is subscribing to better governance and management because there are rules and conditions,” said Akanyang.

She pointed out that there is much progress at BSE in attracting the SMMEs companies for listing and added that BSE is evolving from being an equity exchange to diversifying its product range in the pipeline.

Akanyang is optimistic that BSE strategy was developed to keep constant with the ever revolving world, adding that the local bourse had also improved though a lot still needed to be done. She added that BSE has over the years introduced new products and adapted new technology in a bid to become world standard.

“Our goal is to become the best stock exchange in Africa and it was not possible to concentrate on one product and was among the development of a bond market,” said Akanyang.

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